Consumer confidence falls to its lowest level in 12 years, survey shows

Consumer confidence fell in September to its lowest level in more than 12 years, according to The Conference Board’s monthly survey. Consumers are less optimistic across the board: about the current economy, the future economy, household finances, and the labor market.

As any economist will tell you, one month of data could be an anomaly, and should be taken with a grain of salt. “But the problem is that it's not just one month of data,” said Yelena Shulyatyeva, senior U.S. economist at The Conference Board.

Confidence has been trending downward for years. This month, it just fell more sharply.

“Consumers are really worried that they are planning to spend less, particularly on discretionary items,” Shulyatyeva said.

Americans have been saying they plan to spend less for awhile. And yet spending remains defiantly resilient.

Continued spending is less good than it sounds, said Jonathan Ernest, an economics professor at Case Western Reserve University. “We've seen savings rates drop where people aren't putting away as much for future rainy days, they're kind of treating this like the rainy day,” he said.

That’s because the cost of necessities keeps going up, Ernest said. We’re spending more on gas and food not because we can, but because we have to eat and get to work.

“I have young kids who I'm paying for schooling and care, and I'm also buying lots of groceries and chicken nuggets and things like that,” he said.

Then there’s the new trend that economics professor Paul Shea at Bates College says “raises some eyebrows”: The upper-middle class, or respondents with household incomes in the $125,000-$150,000 range, saw the sharpest decline in confidence.

“So far, the deterioration in consumer confidence has been concentrated among low to middle income households,” Shea said.

Which is why precisely why consumer spending has stayed resilient. Spending by wealthier families has masked cuts by lower-income families.

“And so if this is a sign that the higher income households who account for more of the consumption, of course, are starting to to lose a little bit of faith, that could be a real red flag going forward,” he said.

Shea said he’s waiting to see whether the jobs market data on Friday spells more bad news before he gets too worried.